 "Passenger vehicle sales skid over 3% in November over costly fuel, loans")
The passenger vehicles industry is on a roll. Calendar 2023 proved to be a record year, with 4.1 million passenger vehicles sold. As 2024 kicks off, dealers are seeing a 75 per cent increase in inventory compared to January 2023.
Manish Raj Singhania, president of the Federation of Automobile Dealers Associations (Fada), highlighted the substantial inventory levels at the beginning of the year.
“The top five original equipment manufacturers (OEMs) have an inventory of 594,469 units as of December 2023,” Singhania said. “The overall PV inventory at an industry level could be around 700,000 units. This doesn’t include the stock as of January 1, 2024, which might add another 50,000-60,000 units.”
At the beginning of 2023, the top five OEMs had an inventory of 334,000 units, while the overall industry inventory was about 398,000 units, he added.
Fada’s calculation includes Telangana’s inventory, unaccounted for in the vahan portal, in determining the pan-India inventory levels.
Singhania said the reason for the lower inventory in the past was due to production issues in 2022 because of component shortages. The waiting periods for some models had, as a result, stretched to two years in early 2023. However, the waiting period for cars has now reduced to 3-4 months, indicating increased production and a decline in pent-up demand.
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Dealers are of the view that a recalibration of production planning is needed so that only high-demand models are pushed into the network. “OEMs typically bill the vehicles lying in their plants in December to show wholesales. The situation might improve in the upcoming months,” a dealer said.
Shashank Srivastava, Maruti Suzuki India’s senior executive officer for marketing and sales, said last week that the pent-up demand due to vehicle supply shortages has largely dissipated. He predicted that 2024 would have fresh demand driving the market.
January, however, is anticipated to experience slow demand due to the inauspicious Kharmas period (December 16 to January 15). Despite this, auto-retail sales in December witnessed a 21 per cent overall growth – 28 per cent in two-wheelers, 3 per cent in PVs, 36 per cent in three-wheelers, and 1.3 percent in commercial vehicles (CVs).
Fada’s data for calendar 2023 shows an 11 per cent overall growth in automobile retail sales. Two-wheeler retail sales grew by 9.5 per cent, PVs by 11 per cent, and CVs by 8 per cent.
Fada highlighted the optimal inventory level for two-wheelers, attributing their robust growth to various factors including multiple marriage dates, harvest payments to farmers, availability of diverse models, favourable weather conditions, and positive market sentiment.
Enhanced product acceptance, particularly among the youth, and lucrative financial options, coupled with the anticipation of price increases in January 2024, spurred purchases, Singhania said.
Fada foresees a positive outlook in the near term for the auto-retail sector.
PVs are expected to grow with new product launches and stable market sentiments. “The market is hopeful about improved vehicle availability and demand driven by new models with many OEMs launching their EVs. However, caution should be exercised regarding excess inventory as well as the need to match production with actual market demand,” Fada said.
Similarly, the CV segment anticipates growth from increased government spending due to elections, infrastructural projects, and demand from key industries like coal, cement, and iron ore. “The market is also expected to benefit from the replacement of older vehicles,” Fada added.
The upcoming general election is anticipated to stimulate spending in the two-wheeler category. “The sector expects a boost from new model launches, especially in the first half of the year, and an overall better economic condition coupled with higher EV participation,” Fada noted. “Improved customer sentiments, due to factors like lower fuel prices and crop payments to farmers, are likely to drive demand,” it said in its forecast for 2024.
